Quora Answer: Why Does Venture Capital Love to Fund Technology Projects?

The following is my answer to a Quora question: “Why do venture capital firms love to fund technology projects?” 

The primary reason why venture capital invests in technology is because of their potential to scale rapidly, at relatively low cost.  Investments in areas such as manufacturing and property require relatively large capital investment.  Investments in retail have low scalability due to market saturation. 

Of the 10 largest listed companies in the world by market capitalisation today, five are primarily technology companies (Apple, Microsoft, Alphabet, Amazon, and Meta), three are manufacturers of technology products (Tesla, Nvidia and Taiwan Semiconductor Manufacturing), and the last has significant investments in technology (Berkshire Hathaway).  The only outlier is Saudi Aramco. 

When we go through the list of unicorn startups, the vast majority of them are technology companies.  They include companies such as ByteDance, Stripe, Telegram, OpenSea and Grab.  They are either high technology, blockchain, technology for financial services, or some form of payment gateway.  They all started with little capital requirements, and quickly grew due to investor fervour and market sentiment.  This allows venture to either cash cow, exit, or partial exit with cash cow.